We find that auditors of more conservative clients charge lower fees, issue fewer going concern opinions, and resign less frequently, consistent with more conservative clients imposing less engagement risk on their auditors. Using path analysis we find evidence that both inherent risk and...

A large auditing literature concludes that Big N auditors provide higher audit quality than non-Big N auditors. Recently, however, a high profile study suggests that Propensity Score Matching (PSM) on client characteristics eliminates the Big N effect (Lawrence, Minutti-Meza, and Zhang 2011,...

Contracting theory asserts that the income statement's primary role is to provide useful information for management performance evaluation. We study the effect of fair value accounting on this role by examining the change in earnings pay-performance sensitivity (PPS) following the 2005 worldwide...

We define higher audit quality as greater assurance of high financial reporting quality. Researchers use many proxies for audit quality, with little guidance on choosing among them. We provide a framework for systematically evaluating their unique strengths and weaknesses. Because it is...

We test whether PCAOB inspections help remediate auditors' deficiencies in detecting and reporting material internal control weaknesses. After PCAOB inspectors report higher rates of internal control audit deficiencies, we find that auditors respond by increasing their issuance of adverse...

Palmrose and Kinney (2017) (PK) claim that technical compliance with GAAP is sufficient to justify an unqualified audit opinion. We disagree. PK's view ignores "fair presentation," a concept equivalent to "faithful representation." Their "technical compliance" view portrays GAAP as a set of...

We examine the impact of mandatory IFRS adoption on firm-level “crash risk,” defined as the frequency of extreme negative stock returns. An important feature of our study is that we separately analyze industrial firms and firms in finance-related industries. This is important because IFRS...

Researchers have used the stock price reaction to firms' disclosures of investment in information technology to investigate the value of those investments. This paper extends that research to include knowledge management (KM). In particular, we test whether and how KM is valued by market...

This study investigates the relatively recent and growing trend in analysts making operating cash flow forecasts. We find that cash flow forecasts are made for companies with accounting, operating and financing characteristics that are likely to make cash flows more helpful in interpreting...